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Deal for an IBM unit may be near

Report says GlobalFoundries to buy microprocessor business

By Larry Rulison| on June 11, 2014

Malta

In a deal that has been rumored for months and could have wide-ranging effects on the Hudson Valley economy, GlobalFoundries appears to be on the verge of acquiring IBM Corp.'s microprocessor business.

Bloomberg News reported Wednesday that the two companies are "nearing a deal."

But even more significant could be the fact that GlobalFoundries, which operates its Fab 8 computer chip factory in Malta, may not be interested in IBM's chip factory in East Fishkill.

"GlobalFoundries is primarily interested in acquiring IBM's engineers and intellectual property rather than manufacturing facilities, which have little value as they are more than a decade old," the Bloomberg article said, citing people with knowledge of the structure of the deal.

Representatives of GlobalFoundries and IBM would not comment on the Bloomberg report.

IBM nearly got out of the microchip business in the 1990s before it built its current East Fishkill factory, which became fully operational slightly more than 10 years ago at a cost of $2.5 billion, including about $500 million in state subsidies.

The fab, as chip factories are called, has employed hundreds of leading-edge scientists and engineers over the years and was used as the site for IBM's "fab club" in which companies such as Sony and others worked with IBM to develop microchip breakthroughs. IBM has also coordinated its operations in East Fishkill with research at the SUNY College of Nanoscale Science and Engineering, which today employs many former IBMers who worked in Dutchess County.

IBM also has a much older fab in Burlington, Vt., and it has a chip packaging facility outside Montreal.

The Bloomberg report suggests that GlobalFoundries would supply chips to IBM as part of the deal, which has been rumored to be valued at between $1 billion and $2 billion.

It's been expected in the past that even if IBM sells its core microchip manufacturing business it would maintain its chip research operations in Albany, which work on breakthroughs that have value to industry partners.

GlobalFoundries works closely with IBM on some chip production, and GlobalFoundries recently contracted with IBM to have as many as 200 IBM workers from Vermont and East Fishkill help install chip manufacturing equipment at Fab 8, which is undergoing a $10 billion expansion. The new general manager of Fab 8 also ran the East Fishkill fab, although GlobalFoundries officials say that is a coincidence.

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GlobalFoundries is expected to have 3,000 employees in Malta by the end of this year. However, many of those will come from other states or countries because there aren't enough skilled semiconductor workers in the Capital Region. GlobalFoundries may value IBM's know-how and the employees it could recruit even more than the IBM fab.